Digital downloads hit with tax in Wisconsin

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Digital downloads ranging from games to music and ringtones will be subject to a five percent tax in the state of Wisconsin starting in October.

The measure was approved by Gov. Jim Doyle (pictured), a Democrat, as part of a plan to close the state’s $6 billion budget gap.

“Right now we’re moving into a whole new world of products that are transmitted over the Internet,” said State Sen. Kathleen Vinehout.

The move is not without opposition, however. State Rep. Scott Suder, a Republican, speaking to the University of Wisconsin’s student newspaper, said, “”It’s basically taxing students to fill in the Doyle budget shortfall, and I think that’s unfair.”

More troubling for some lawmakers is how the state expects to collect that tax. “I don’t know how we as a government are going to, at this stage anyway, audit somebody’s downloads so that we know what they owe in taxes,” said State Rep. Jeff Smith, a Democrat.

The tax on “digital goods” is estimated to raise $10.9 million by 2011–a far cry from $6 billion, to be sure, but governments are taking every step they can to repair budget shortfalls amidst a severe economic climate.

I think the question of enforcing this tax is vastly underrated. Not only will every major download service be forced to rework its infrastructure to charge a sales tax for customers in Wisconsin, but this raises another question for game download providers using artificial currencies, like Microsoft and Nintendo with their respective “Points” currencies. Do you levy a tax on purchases made in Wii Points, or do you tax the purchase of the Points themselves?

And what of subscription services? Suppose I pay $60 a year each for Rhapsody for my music and GameTap for my computer games. Am I not subject to the tax that iTunes and Steam customers have to pay to get access to their music and games?

{ad}These are questions that Wisconsin’s legislature – and content providers – will have to work together to answer, and for the reasons above it won’t be as simple as when online retailers like Amazon charge tax to customers living in a certain state.

I’m not morally against levying a tax for downloads. It does seem fair that a government should still be able to levy sales tax for purchases that happen to be made online. But I do find Wisconsin’s measure technically troublesome, and I think it’s time governments made use of the advantages of online commerce – like the erasing of geographical boundaries – rather than use “old-world” divisions to hamper the convenience of digital downloads.

However, if adding a download tax makes people reconsider paying for extremely annoying ringtones, I may have to throw my full weight behind the measure, no matter how difficult it may be.

Speak Your Mind

hodar

Re:Blake

All taxes are based upon currency you spend, not upon the item you buy. For example, if you buy widgets from Sneed Inc, you don’t pay a per-widget tax, you pay a tax on the number of dollars you spent. So, Wii or XBox Live points are immaterial, if you spent $25 on your points, you pay tax on $25. That’s simple.

What is baffling to me is the intelligence that politicans show. They feel entitled to you money, and feel you are stealing from them every day you don’t give them your money. Further, for the $10 Million he ‘knows’ he can rape in (er … rake in); I’d wager he’s going to spend $20 Million in setting up enforcement, collections and a monitoring system so he has a clue as to who is paying, who hasn’t paid, and how much overall should be expected to be made. Then you have the administative costs assocaited with this entirely new revenue stream. Sort of like spending $20 for the opportunity to go fishing for a $5 bill.

Where does this boy-genius hope to spend his new-found money? Maybe to give illegal aliens free medical care? Or is this designed to give affordable housing, in-state tuition, daycare and additional payments to illegal aliens? After all, the Democratic party can’t possibly do enough to reward people for breaking the laws, and invading our country. We provide bi-lingual teachers in almost all of our schools (how many schools offer bi-lingual support for Hmong?). Hint: The Hmong are here legally, for the most part.